Bear tights grip on Asian markets

Nikkei Slump by 6.2% to lowest level since 1982 while Hang Seng registered a biggest drop since 1997


The stock markets in the Asian region were closed lower in volatile trading after large falls in the region over the past week. The Asian markets also took a clue from Wall Street movement as the U.S. stocks closed more than 3% lower, with all the three major averages setting new five-year closing lows. The decline came as investors reacted to a panic fueled by overall weakness in the global markets combined with falling commodity prices. The Dow Jones Industrial Average ended the day down by 312.30 points, to 8,378.95. The Nasdaq Composite Index finished lower by 51.88 points at 1,552.03. S&P 500 finished lower by 31.34 points at 876.77.

In the commodity market, gold returned early gains to lose more than 3%, as equity markets plunged, with the latest series of government interventions not enough to stem fears about global recession. Gold was up almost 2% early on as investors scoured for safe havens amid fresh government efforts to calm market turmoil, before retracing by more than $35. Spot gold was quoted at $707.90 an ounce at 0843 GMT versus $728.35 on Friday. U.S. gold futures for December delivery fell $20.50 to $709.80 an ounce, after falling below $700 last week.

The crude oil fell for a second day in New York on concerns that OPEC's production cut may fail to arrest a slump in prices as the global financial crisis threatens to reduce energy demand. The 13 members of the OPEC agreed on October 24 to lower supply by 1.5 million barrels a day starting in November.

On 24 October 2008, the front-month contract fell $3.69, or 5.4%, to $64.15, the lowest close since May 31, 2007. Futures are down 31% from a year ago. The front-month contract dropped 11 percent last week, the fourth straight weekly decline. Brent crude oil for December settlement declined 80 cents, or 1.3%, to $61.25 a barrel on London's ICE Futures Europe exchange at 1:42 p.m. in Singapore.

In the currency market, the U.S. dollar was trading in the lower 94 yen-range on Monday. In early trades, the dollar was quoted in a range of 94.12-94.18 yen, down 1.02 yen from Friday's close of 95.14-95.17 yen in Tokyo.

The Australian dollar opened weaker. The Aussie opened at US$0.6196, down from Friday's close of US$0.6391.

Coming back in equities, the Japanese market pared its losses after hitting a 26-year intraday lower earlier in the session. The South Korean market was trading in negative territory after gaining earlier following the Bank of Korea's unexpected decision to cut its key interest rate in an emergency meeting. Markets in Singapore, Malaysia and New Zealand were closed on account of public holidays.

In Japan, the benchmark Nikkei 225 Index slumped by 486.18 points or 6.36% to 7,162.90, closing below 7,603 for its lowest level since 1982. The broader Topix Index of all First Section Issues was down 59.65 points or 7.40% to 746.46.

Japan's finance minister Shoichi Nakagawa said that the government was closely watching the foreign exchange market and added that excessive currency moves were bad for the economy and financial markets, indicating that the government was growing concerned about the pace of the yen gains.

In Mainland China, the Shanghai stock index extended losses for the fifth consecutive day to finish the session a steep 6.3% down to hit a two-year low on broad based slump across the board, with sharp falls in commodity related stocks and energy shares. The Shanghai Composite Index tumbled 116.27 points, or 6.3%, lower to 1,723.35, off the day’s high of 1,809.22 and low of 1,772.23.

In Hong Kong, the stocks crumbled under a barrage of selling, with the benchmark Hang Seng Index plunging 12.7% to its lowest finish in more than four years. The Hang Seng Index slumped as much as 15.4% during the day, sliding under both the 12,000- and 11,000-point milestones in a single session. After falling as low as 10,676.29, it pared losses to end 12.7% down at 11,015.84 – the lowest closing level since Sept 23, 2003, when it ended at 10,944.36.

The Australian stock market closed lower, after opening the week on weaker note amid a huge sell-off on Friday and continued global jitters about a deepening recession. The benchmark S&P/ASX 200 index closed down by 60.20 points or 1.56% at 3,809.20 - its near four-year low. The broader All Ordinaries index was losing 63.30 points or 1.65% to 3,768.30.

The South Korean stock market was closed marginally up in a volatile session after earlier climbing into positive territory following the Bank of Korea's unexpected decision to slash its key interest rate in an emergency meeting. The benchmark Korea Composite Stock Price Index, or Kospi, gained 7.70 points or 0.82% to 946.45.

On the economic front, the Bank of Korea slashed interest rates by 75 basis points to 4.25% from 5.00% in an emergency meeting on today morning to help the struggling economy and the plummeting stock market. It was the second rate cut this month as the Bank of Korea trimmed rates by 25 basis points on 9 October 2008. Before raising rates in August to combat inflation, the board had left interest rates at 5.00% for eleven straight meetings.

The South Korean President Lee Myung-bak said in a budget speech to parliament that the country is capable of overcoming the ongoing financial crisis through a combination of appropriate policy measures, including tax cuts, deregulation, fiscal spending increase, and sufficient supplies of foreign and local currencies. He added that the government would continue to supply liquidity into the financial markets until the uncertainty eased.

In the Philippines, the stock exchange briefly halted trading after the main index fell by more than 12%. It fell further as trading resumed and finished down nearly 240 points, it worst single-day point drop on record. The benchmark index PSEi toppled 12.27% or 239.66 points to 1,713.83.

In Taiwan, the share markets in Taiwan touched another fresh five-year lows as margin calls increased after recent steep losses driven by fears of a global economic recession. The market was also pressured by the restoration of the 7% limit on daily share price falls. Authorities had halved the limit to 3.5% for two weeks until last Friday in a bid to slow the pace of stock declines amid a global financial crisis. The 7% limit was restored today. Taiex, the benchmark index, continued to remain below the key 5,000 points level, breaches the previous five-year low level. The weighted index closed down 212.75 points or 4.65% at 4,366.87 - the lowest level since 11 May 2003, when it ended at 4,349.91 points.

In India, the BSE 30-share Sensex closed down 191.51 points, or 2.2%, to 8,209.55. The Sensex had lost 1,003.68 points to 7,697.39 in afternoon trade. The S&P CNX Nifty lost 59.80 points, or 2.3%, to 2,524.20, after tanking to a three-year low of 2252.75.

In the other regional markets, European shares fell tumbled again, amid more heavy losses in Asia and more trouble in the financial sector after Deutsche Postbank reported a quarterly loss and said that it will raise capital.

Of European national indexes, the U.K. FTSE 100 index fell 5.3% 3,678.17, the French CAC-40 index fell 5.9% to 3,006.59 and the German DAX 30 index fell 4.4% to 4,108.09.

On the economic front, the robust pace of money supply growth in the euro zone decelerated in September, as lending growth to the private and corporate sector slows. , According to the European Central Bank the September broad M3 money supply growth was at an almost two-year low of just 8.6% on the year, below August's 8.8% annual rise.

The September figure is the lowest growth rate since October 2006 when it was 8.5%, and even corporate lending, which has been resilient in recent months, was lower.

M1 money growth, meanwhile, picked up in September to an annual rate of 1.2% from 0.2% on the year in August. Loan growth to non-financial corporations eased to 18.9% on the year in September, from 20.7% in August. Overall, private sector loan growth edged down to 8.5% on the year from August's 8.8%. The ECB also reported that the year-on-year growth rate of loans to households grew 3.8% in September, just down from a rise of 3.9% in August. The closely watched three-month moving average for M3, which irons out some of the monthly fluctuations, expanded 8.9% in the July-September period, down from 9.2% in June-August.

Looking ahead the day is scheduled to release new home sales data from U.S. In the evening we have speech from treasury head Mr. Paulson. In the late evening Japan will release details on retail trade.